Steelmaking costs 2008

With all the talk of the impending 2008 iron ore price increase, industry observers might be forgiven for taking their eye off other steelmaking costs. But ferrous scrap prices also rocketed in January [see http://www.steelonthenet.com/commodity_prices.html], rising a massive $90/tonne to ~$385-$400 fob Rotterdam for HMS1. Just to add to the misery, natural gas prices also jumped 20% in January [http://www.steelonthenet.com/commodity_prices.html], to reach record levels ...

Anyone betting on a 2008 steel price fall ?

blogger@steelonthenet.com

2008 iron ore price rise

Reports are coming in that Nippon Steel has just agreed an iron ore price increase, effective 1st April 2008. The price rise is 65%.

Steel mills typically accept whatever price is first settled with one of the big three miners, so it seems probable that the 65% iron ore price increase will be the benchmark settlement for other deals in the coming weeks.

For original report, see http://uk.reuters.com/article/oilRpt/idUKL176439220080217

blogger@steelonthenet.com

2008 steelmaking costs rise steeply

As discussions centre on crude oil prices hitting $100 a barrel this week, steel portal www.steelonthenet.com has recalculated current steelmaking costs with the latest inputs prices for scrap, electricity, coal etc.

Even before the expected 2008 price increase for iron ore, steelmaking costs for a typical West European steelmaker have risen some 35-40% in the 12 months since January 2007. Electric arc furnace steelmaking currently costs approx $447 per tonne of liquid steel. BOF steelmaking currently costs $353 per tonne. The figures compare to costs of $321 and $262 respectively exactly one year ago.

The summary cost calculations behind the current figures are shown online at www.steelonthenet.com/steel_cost_eaf.html and www.steelonthenet.com/steel_cost_bof.html. Interestingly, the cost differential between BOF and electric steelmaking has swung towards integrated steelmaking, which is now $94/tonne cheaper [at liquid steel level] than scrap-based steelmaking.

It remains to be seen how this differential will be affected by the current round of negotiations about 2008 iron ore prices. The expected iron ore price rises seem very likely to push mid-2008 BOF steelmaking costs towards $400/tonne liquid steel, and EAF steelmaking towards $500/t meaning that these costs will more than 50% above end-2006 price levels.

It certainly seems like a good time to be selling scrap ...

blogger@steelonthenet.com

Iron ore prices to soar

The latest view on the 2008 iron ore price is that it will increase by 30-50% over 2007 price level. Interestingly, this perspective is not driven by the BHP-Billiton - Rio bid. Rather, this view emerges for a different reason - which is urbanisation in China and India. According to the report, demand for steel will increase as people move from rural agriculture-based activities to manufacturing or service-based activities located in cities.

For original report, see http://www.stuff.co.nz/4282964a6026.html

blogger@steelonthenet.com

2007 and 2008 world steel demand forecast

In their 'Short Term Outlook' published today, the International Iron and Steel Institute (IISI) predict that year 2007 world steel demand will be just short of 1.2 billion metric tonnes. Steel consumption in 2008 is expected to grow by 6.8%. This means that 2007 consumption of ~1198 mt will increase to ~1279 mt in 2008.

Brazil, Russia, India and China lead the growth in steel demand, accounting for ~77% of world demand growth in 2007 and ~71% of the expected growth in 2008.

For full IISI report, see http://www.worldsteel.org/index.php?action=newsdetail&id=213

blogger@steelonthenet.com

Iron ore prices 2008

Reports are coming in that the forthcoming round of iron ore price negotiations could result in some quite large price increases once again.

The main issue seems to be the very tight iron ore market today. Price negotiations are therefore expected to move one way only - and this is upwards.

Some analysts even consider that the 2007 / 2008 iron ore price rise - in percentage terms - could even be as high the 71% rise seen around March 2005.

To read more on this topic, visit http://www.busrep.co.za/index.php?fArticleId=4033500&fSectionId=552&fSetId=662

blogger@steelonthenet.com